Obamacare Wellness Programs Could Raise Health Costs

One part of the Affordable Health Care Act that kicks in with the rest of Obamacare in 2014 is a greater monetary incentive for employers to implement wellness programs.

Worker wellness programs — ways for employees to get healthier through such items as checkups, workout and weight loss programs, smoking cessation as well as vaccinations — have been around for more than 30 years with the associated financial rewards and punishments regulated by the federal government.

And even though it's not a mandatory provision — employers can choose to avoid implementing any worker health program — many more firms are expected to take part in setting up these plans next year in an effort to cut down on health care costs.

What it means economically for workers whose employers do participate can be a mixed bag depending on their habits. There are bigger financial rewards for healthier workers along with more costly punishments — specifically increased insurance premiums — for those who are considered health risks. (Read More: South Carolina Workers Could Pay More for Health Care)

For instance, under the 2014 provisions, health insurers will be able to charge 50 percent more on insurance premiums for someone who smokes. The previous rule, set in 2006, was a top increase of 20 percent. So, a 60-year-old smoker without dependents could end up paying nearly $5,100 more for health insurance each year at work starting next year, instead of around $1,100 now, according to insurance industry estimates.

On the flip side, a reward would offer up to a 30 percent reduction in premiums for someone who takes part in smoking cessation programs or who lowers their cholesterol. Other benefits for better health results could also include rebates and taxable gift cards.

"These wellness programs will be set up by the companies, and they can offer the carrot or the stick or both to get workers involved," said Amy Gordon, an employee benefits lawyer at McDermott Will & Emery.

"There are even rewards if you do almost nothing, such as just taking a diagnostic test and the outcome doesn't matter. It just depends on how the firm sets it up," Gordon said.

Employers can even include workers' children and spouses for the reward and punishments if they are part of a worker's insurance coverage.

"Families tend to drive up the cost of health insurance for a firm as much as workers, so it does make sense to look at a worker's dependents and whether they should be included," Gordon said.

"And a firm can often look at what type of ailments are driving up costs, say diabetes for example, and base their incentive programs on how workers are testing for it," she said.

Wellness programs started in the 1970s as a way for employers to improve worker productivity and cut down on absenteeism. As the U.S. became more health conscious over the years, workers began to ask their firms to include health programs, like gyms and flu shots.

By 2008, according to the Center for Health Affairs, about 88 percent of large companies in the U.S. (more than 200 employees), and about half of small companies (three to 199 workers) offered wellness programs. In 2006, the government established guidance rules for the percentage workers could get for punishments and rewards. (Read More: Report Faults High Fees for Out-of-Network Care)

The standard was up to 20 percent in premium hikes or reductions, or rebates. In 2014, it will be 30 percent top, with smoking penalties up to 50 percent in additional health insurance premium costs.

For employers, the costs of worker habits have become expensive. The U.S. Center for Disease Control and Prevention reports that more than 75 percent of an employer's health care costs and productivity losses are related to employee lifestyle choices.

According to the CDC, workplace alcohol, tobacco and other drug use costs American companies over $100 billion each year and obesity costs $147 billion a year.

"Firms are more aggressive these days on certain health issues like weight loss, smoking or having vaccinations," said Tom Vincz, a spokesman for Horizon Blue Cross Blue Shield of New Jersey, which counsels companies on setting up wellness programs. "When we look at a firm, our goal is to set up the best program for the company and the workers."

Vincz said Horizon has seen the benefits of its own wellness program.

"We have some 89 percent of our 5,000 workers involved," he said. "We embraced a weight loss program in 2011 and we've seen the benefits of that with a huge reduction in weight for many workers."

But some companies will likely pass on putting in any wellness program in 2014 they might not have already started, Gordon said.

"Companies are mixed on wellness programs," Gordon said. "Some say it's a great opportunity, while others say it's not their business to regulate the health of our workers." (Read More: Rule Limits Aid to Families Who Can't Afford Employers' HealthCoverage)

While most workers cannot be forced to join a wellness program, many firms have implemented provisions like asking their employees to declare whether they smoke. A yes answer can raise a worker's health insurance premiums purchased through work or even deny coverage.

For example, Scotts Miracle-Gro bans employees on its health insurance policy from smoking, regardless of whether it is done on company or personal time.

Cadmus Community Corp. of Richmond, Va., requires employees and their spouses to submit to health-risk assessments in order to obtain health insurance. Iowa-based Principal Financial Group has a similar policy in which workers must undergo health exams that track things like weight, blood pressure and use of tobacco to qualify for coverage.

Some workers, like members of the Oregon State Police, have filed lawsuits against their wellness program — one that docks them a monthly fee of up to $30 if they don't participate in an online health survey.

Another issue drawing the ire of workers is what constitutes a pre-existing condition — something health insurers cannot deny consumers through Obamacare.

Some workers contend obesity, diabetes and smoking are pre-existing conditions and therefore those who smoke or are overweight can't be denied health insurance coverage or have their premiums raised because of wellness programs.

Many of the lawsuits against the programs are based on regulations under the Health Insurance Portability and Accountability Act of 1996. Those rules say that employer-sponsored group health plans may not vary premiums or contributions, or provide different discounts or rebates, to similarly situated individuals as a result of a health factor.

Whether any wellness programs are getting people healthier or not is unclear yet, said Gordon.

But In the end, she said it's up to the companies and workers to decide how healthy they want to be.

"I'm a big proponent of wellness programs because I think taking proactive steps is the right thing to do," Gordon said. "If we can drive down medical costs and getting people healthier, I can't see the harm in that."